Spending Impasse Continues as Trump Mulls Emergency Action

U.S. trade officials in Beijing with ag trade on agenda
The partial federal gov't shutout continues with little evidence President Donald Trump and Democrats in Congress will resolve a standoff early this week over border wall/security that has halted operations across about 25% of gov't agencies. Impacts show government paycheck...

U.S. trade officials in Beijing with ag trade on agenda

The partial federal gov't shutout continues with little evidence President Donald Trump and Democrats in Congress will resolve a standoff early this week over border wall/security that has halted operations across about 25% of gov't agencies.Impacts show government paychecks and other key deadlines come Friday, so that could put pressure on all sides to reach an accord. Some U.S. trade officials are in Beijing through Tuesday regarding the next steps in settling lingering trade and investment differences. Fed Chairman Jerome “Jay” Powell on Thursday participates in a discussion at the Economic Club of Washington. Several other Fed speakers will present this week.

Weekend talks to end the spending impasse produced meager results. President Donald Trump said near-daily meetings will continue, but Democrats did not confirm that possibility. Trump last Friday said that while he "absolutely" told congressional leaders at a White House meeting that the shutdown could last months or years, he hopes that planned talks lead to an agreement, so the gov't reopens "very quickly". Trump will meet with congressional leaders again this week, according to House Republican leader Kevin McCarthy (R-Calif.).

Several U.S. trade officials are in Beijing with several observers expecting continued progress on containing the differences between the two nations. See Policy Updates for details.

Both the House and Senate reconvene on Tuesday. The House will vote on a resolution to intervene in a Texas ObamaCare lawsuit. The Senate will hold a procedural vote on S 1, legislation on Middle East policy that was introduced by Majority Leader Mitch McConnell (R-Ky.) and Sens. Marco Rubio (R-Fla.), James Risch (R-Idaho) and Cory Gardner (R-Colo.).

Economic updates for the week include:

Monday:— Institute for Supply Management releases its Non-Manufacturing Index for December. Economists forecast a 58.7 reading, down from November’s 60.7. Readings above 50 indicate an expanding economy. Economic activity in the nonmanufacturing sector has grown for 106 consecutive months through November 2018.
— Factory Orders
— China releases its foreign-exchange reserves. They likely increased a modest $10 billion in December to $3.072 trillion, as the yuan gained some ground against the U.S. dollar at the end of last year, a Wall Street Journal poll shows.

Tuesday:
— Bureau of Labor Statistics releases its Jobs Openings and Labor Turnover Summary for November. Consensus estimate is for a seven million reading, little changed from October.
— National Federation of Independent Business reports its Small Business Optimism Index for December. Expectations are for a 103 reading, down from November’s 104.8. Despite pulling back from an all-time high this summer, small-business bullishness continues an exceptionally strong two-year trend.
— NFIB Small Business Optimism Index
— JOLTS
— Consumer Credits

Wednesday:
— FOMC Minutes from December meeting. The minutes will likely show how officials viewed conflicting signals from the economy at the end of 2018. Consumers remained confident, spending was solid, and the services and manufacturing sectors remained healthy. Chairman Jerome “Jay” Powell stressed Friday the Fed is willing to change its rate path in 2019 if economic data takes a sustained turn for the worse; the central bank currently has two rate rises penciled in for this year.
— MBA Mortgage Applications

Thursday:
— Department of Labor reports initial jobless claims for the week ended on Jan. 6. Expectations are for 225,000 claims.
— Wholesale Trade
— Fed Balance Sheet
— China publishes prices data for December. More economists have warned about rising deflation risks in the Chinese economy, because of a sharp deceleration in industrial prices, which have squeezed on companies’ profits. Economists expect China’s producer-price index, a gauge of factory gate prices, to have risen 1.5% in December, compared with a 2.7% increase in November. China’s consumer inflation likely eased a little to 2.1% from 2.2%.

Friday:
— Bureau of Labor Statistics (BLS) releases its Consumer Price Index for December. Economists forecast a 0.1% decline after a flat reading in November. The core CPI, excluding volatile food and energy prices, is expected to rise 0.2%, matching November’s figure. The BLS also reports real average hourly and weekly earnings for U.S. workers. The seasonally adjusted annual rise in hourly earnings was 0.8% in November, with a 0.6% rise in weekly pay.
— Treasury Department releases the monthly budget statement for the U.S. In the past fiscal year, which ended on Sept. 30, the federal deficit jumped by 17%, to $779 billion — the highest figure since 2012. Treasury has said that it expects the shortfall to hit $1 trillion this fiscal year.

Fed speakers on tap:

Monday:— Atlanta Federal Reserve Bank President Raphael Bostic participates in a fireside chat about economic outlook and monetary policy at the Rotary Club of Atlanta, in Atlanta, Ga.

Wednesday:
— Atlanta Federal Reserve Bank President Raphael Bostic delivers a speech to the Chattanooga Chamber of Commerce at their 2019 Economic Outlook Breakfast, in Chattanooga, Tenn.
— Chicago Federal Reserve Bank President Charles Evans delivers a speech at the Discover Financial Services Company Meeting in Riverwoods, Illinois.
— Boston Federal Reserve Bank President Eric Rosengren provides economic outlook to members of the Boston Economic Club as well as Boston Fed staff in Boston, Mass.
— Bank of Canada announces its monetary-policy decision. The market widely expects the central bank to keep its benchmark interest rate at 1.75%.

Thursday:
— Richmond Federal Reserve Bank President Tom Barkin speaks on "Ensuring Longer-Term Growth" at the Raleigh Chamber of Commerce 2019 Economic Forecast event in Raleigh, N.C.
— St. Louis Federal Reserve Bank President James Bullard gives a presentation on U.S. economic and monetary policy at the Little Rock Chamber of Commerce's Power Up Little Rock Event in Little Rock, Ark.
— Federal Reserve Chairman Jerome “Jay” Powell participates in discussion at the Economic Club of Washington in Washington, DC.
— Chicago Federal Reserve Bank President Charles Evans delivers a speech and participate in a moderated Q&A session at the Milwaukee Business Journal Economic Forecast in Milwaukee, Wisconsin, with audience Q&A.
— Minneapolis Federal Reserve Bank President Neel Kashkari speaks about immigration and economic growth at the Jewish Community Relations Council Luncheon in Minneapolis, Minn.
— Federal Reserve Vice Chairman Richard Clarida gives a speech on economic outlook and monetary policy at the Downtown Association in New York, N.Y.

Most USDA reports other than Monday's Export Inspections will not be released pending a resolution of the partial U.S. government shutout.

Vietnam’s General Customs releases December and 2018 commodity exports

Port of Rouen data on French grain exports

Buenos Aires Grain Exchange weekly crop report

Energy reports and events:

EIA natural gas storage change

Friday, Jan. 11

Energy reports and events:

Baker Hughes weekly U.S. oil/gas rig counts

Other reports and events this week include:

Monday, Jan. 7

U.S./China trade talks in Beijing. Two days of meetings are aimed at carrying out the Dec. 1 truce by Presidents Donald Trump and Xi Jinping. U.S. delegation will be led by a deputy U.S. trade representative, Jeffrey D. Gerrish. Other American officials at the talks include Gregg Doud, the USTR’s chief agricultural negotiator; David Malpass, the Treasury Department’s under secretary for international affairs; Gil Kaplan, under secretary of commerce for international trade; Ted McKinney, undersecretary of agriculture for trade and foreign agricultural affairs; and Merry Lin, director for global and Asia economics at the National Security Council.

Tuesday, Jan. 8

CES, the annual electronics trade show organized by the Consumer Technology Association, kicks off in Las Vegas. It will run through Friday.

House and Senate reconvene.

Wednesday, Jan. 9

Sec. of State Mike Pompeo travels to Middle East Jan. 8-15. Pompeo will begin in Amman, Jordan, and then will travel to Cairo where he’ll meet with Egyptian leaders and give a speech on the U.S.’ role in the Middle East. Pompeo will also travel to Bahrain, UAE, Oman, Kuwait. In Saudi Arabia, Pompeo will discuss Yemen, Iran and Syria and will seek an update on investigation into death of journalist Jamal Khashoggi. Pompeo will lead a delegation at the 2nd U.S.-Qatar Strategic Dialogue in Doha.

State of American Business address by Chamber of Commerce President Tom Donohue.

Federal Reserve Chairman Jerome “Jay” Powell participates in discussion at the Economic Club of Washington in Washington, DC.

Lessons from 2008-2009 financial crisis. Former Obama-era Office of Management and Budget Director Peter Orszag, former Obama-era National Economic Council Director Lawrence Summers speak at Brookings Institution-UVA School of Law event.

U.S. Climate Prediction Center’s next monthly El Niño update scheduled to be published.

Friday, Jan. 11

If gov't shutout standoff continues, all workers in the agencies and departments affected will miss their next paycheck normally released Jan. 11.

Federal courts run out of cash — Administrative Office of the U.S. Courts says system has enough leftover money from fees and other sources to operate through Jan. 11. Nonessential workers at the 94 federal district courts, and at higher courts across the country, may have to stay home even as skeleton crews show up — without pay — to handle matters deemed essential under U.S. law, including many criminal cases. Individual courts, judges will decide how to fulfill duties.